Regulatory Cooperation

Regulatory cooperation – in which corporate influence becomes an intrinsic part of the development of goverment regulation – is one of the cornerstones of recent forms of FTAs, such as TTIP.

One of the key objectives of treaties like TTIP is to bring about a convergence between EU and US regulations and standards in order to remove obstacles to trade. These regulations may, for example, cover safety standards for food, drugs, and chemicals; labour rights, and intellectual property.

Regulatory convergence can be brought about through

  • ‘harmonisation’ (making regulations and common standards between the trading partners as similar as possible), or
  • ‘mutual recognition’ (the acceptance of the trading partner’s standards as equivalent).

However, there can be considerable divergence between the standards of trading partners like the EU and US, stemming in part from different approaches to assessing safety, and different decision-making procedures. This wide divergence has led to fears that it will not be possible to achieve regulatory convergence during negotiations for TTIP, and so some mechanism, like regulatory cooperation, will be necessary as a long term measure to allow the EU and US to work out their differences.

In many regulatory areas, the EU has higher standards. For example, in the US, producers can assume that products are safe until shown to be harmful (and research that demonstrates safety may remain unpublished on the grounds of commercial confidentiality). But in the EU companies must prove their products are not harmful before they can be sold. There are serious concerns that, with measures to remove obstacles to trade – like the harmonisation or mutual recognition of regulations, and the potential influence of corporations through regulatory cooperation – that EU standards will be lowered.

Regulatory cooperation between the EU and US is not new: what is new is the level of ambition for this in new agreements like TTIP.  For example, in future big business and the US government will be able to exert significant influence on the development of the EU’s regulatory policy. They will have input from a very early stage, if not actually involved in co-writing proposals.  And there will be no limit to the kind of regulation that can be considered appropriate for their attention – it covers anything you can make money on.

The US proposals for regulatory cooperation under TTIP are still secret but those from the EU have been made public after a number of leaks. They include that:

  • regulatory cooperation should become mandatory, with the strong involvement of business built into joint procedures;
  • regulatory cooperation should be overseen by a powerful body, initially called the Regulatory Cooperation Council, but now called the Regulatory Cooperation Body (RCB).
  • An early warning mechanism should exist to ensure that the partners to the treaty can become involved in the preliminary stage of each others regulatory decision making – typically in the drafting phase – before elected politicians have become involved.
  • The methods for undertaking Regulatory Impact Assessments (part of the process of deciding whether to regulate and how to strike a balance between protecting the citizen and limiting the impact on businesses) should be reformed, with special attention to the effects of a proposal on trade.
  • Both sides should be able to call for a ‘regulatory exchange’ at any point in the decision making-process. This would be a formal ‘crisis meeting’ in which the European Commission and US representatives discuss either a planned or existing regulatory measure, including member state legislation, to identify ways of preventing one side from adopting a rule that would harm the others’ interests.

The inclusion of ‘regulatory cooperation’ in a trade and investment agreement allows the dismantling of regulation behind closed doors – even after a treaty has been signed: this is why TTIP is called a living agreement. Some see that this facility is even more advantageous to transnational corporations than investment protection measures like ISDS. What’s more, the prospect that regulatory cooperation might be included in TTIP already seems to deter the EU from regulating. For example, apparently in response to threats from the US about the future of TTIP, the EU has repealed a ban on the treatment of beef with lactic acid and abandoned plans to ban certain pesticides associated with cancer and infertility.

The inclusion of regulatory cooperation in treaties like TTIP is happening alongside plans on the part of various governments to reduce or remove regulation.  For example, the European Commission,  strongly influenced by the current UK government, has a programme called Better Regulation. This started out as a way of cutting unnecessary ‘red tape’ but over time has become much more ambitious, gradually removing the legislative safety net protecting the health of the public and the environment, supposedly to increase jobs and growth.  A similar process is taking place in the USA, where it is more advanced.

Sources and further information

updated June 2016

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